With Trump’s proposed 2025 tax law changes on the horizon, it’s crucial for dental practice owners and their families to stay informed about how these updates might shape their financial strategies. While we can’t know if the proposals discussed during the campaign will pan out in the end, it is still important to understand what they are and how they can impact your dental practice and personal financial planning. 

Below, we’ve summarized some of the the proposals, focusing first on business-related changes and then on those that could affect your personal finances.

Potential Tax Changes Impacting Dental Practices 

1. Restoring TCJA Business Tax Provisions

• What It Is: A proposal to reinstate business-friendly provisions from the Tax Cuts and Jobs Act (TCJA), such as 100% bonus depreciation, research and development expensing, and interest deduction limitations.
• Government Impact: This is expected to increase gross national product (GNP) by 0.5% and add 119,000 jobs but reduce tax revenue by $643 billion over 10 years.
• What It Means for You: These changes would allow your dental practice to benefit from significant deductions on investments like new equipment or technology. This could free up cash flow for reinvestment in your business.

2. Encouraging Domestic Production

• What It Is: A deduction of 28.5% for domestic production activities, effectively reducing corporate tax rates on qualifying activities to 15%.
• Government Impact: Expected to increase GNP by 0.2% and add 38,000 jobs, but it could reduce tax revenue by $361.4 billion over 10 years.
• What It Means for You: Dental practices that rely on domestically manufactured supplies or equipment could see lower costs and additional tax savings, making it easier to invest in your practice.

3. Extending the Opportunity Zone (OZ) Program

• What It Is: Extending the OZ program, which provides tax benefits for investments in underserved communities.
• Government Impact: Stimulates community development by encouraging housing, infrastructure, and business growth in underserved areas.
• What It Means for You: If you’re considering opening a new location in an underserved area, the OZ program could offer tax deferrals or exemptions, making expansion more financially viable.

Potential Tax Changes Impacting Individuals

1. Permanent Gift and Estate Tax Exemptions

• What It Is: Maintaining the current lifetime gift and estate tax exemption of $13.99 million per spouse.
• Government Impact: Expected to reduce tax revenue by $205.6 billion over 10 years with minimal economic effects.
• What It Means for You: This simplifies estate planning and makes it easier for high-net-worth families to pass on wealth to future generations.

2. No Tax on Tips

• What It Is: A proposal to exempt tips from income taxes, though employment taxes would still apply.
• Government Impact: This would have a negligible effect on GNP but would reduce tax revenue by $118 billion over 10 years.
• What It Means for Your Practice: While it won’t directly impact dentists, exempting tips from taxes could benefit service industry employees, potentially easing wage pressures.

3. Exempting Overtime Pay from Federal Income Tax

• What It Is: A proposal to exempt overtime pay from federal income taxes.
• Government Impact: Expected to increase GNP by 0.3%, create 405,000 jobs, and reduce tax revenue by $747.6 billion over 10 years.
• What It Means for You: If your practice employs hourly staff, this could make overtime work more appealing, helping you retain staff and cover busy periods more effectively.

4. Federal Income Tax Exemption for Social Security Benefits

• What It Is: Eliminating federal income taxes on Social Security benefits.
• Government Impact: Projected to increase GNP by 0.1%, add 55,000 jobs, and reduce tax revenue by $1.2 trillion over 10 years.
• What It Means for You: Retirees, particularly those in higher tax brackets, could see significant savings, making this a boost for retirement planning.

Looking Ahead

These potential changes highlight the importance of staying proactive with your financial and tax strategies. While some updates offer new opportunities for growth and savings, others may introduce challenges that require careful planning.

By working closely with us, you can position your dental practice and personal finances to accommodate these changes successfully. Reach out to our team today to discuss how these proposals might impact your future.